Over the past year or so, Florida has seen a glut of foreclosure filings, many times involving mortgagees that are simply not willing to bend to do what really needs to be done to keep you in your house. This has funneled homeowners either into surrendering their house and filing a Chapter 7 bankruptcy, or for those with regular income wanting to keep their house, into a Chapter 13 bankruptcy. Also, those with regular incomes, two or more mortgages, with house values that are less than the principle balance of their first mortgage, Chapter 13 may allow one or more mortgages to be eligible for a cram-down.
- Preparation. Success with a Chapter 13 takes planning, as they are not cookie cutter events. Every Chapter 13 bankruptcy is unique. There is a lot of information on the internet about not only Chapter 13 bankruptcies, but debt relief in general. An excellent source of information about Chapter 13 bankruptcies can be found at the www.uscourts.gov. Doing your homework before proceeding to an attorney's office can greatly enhance your chances of making correct decisions towards the planning and implementation of your bankruptcy. These decisions can have a direct impact on your chances of successfully completing the bankruptcy, and your quality of life during your bankruptcy, which typically last from 3 to 5 years.
- Budget. Budget. Budget. Your bankruptcy is centered around your living expenses, and your living expenses may help determine whether a Chapter 13 bankruptcy is feasible. One of the problems people run into when filing bankruptcy is having not properly accounted for all necessary living expenses at the outset. This will determine how much money you will be able to repay, and your realistic expectations of success in the bankruptcy.
- Payroll Deductions. During your Chapter 13 bankruptcy, depending on the jurisdiction you are filing in, you may need to turn over your tax refund money to the Trustee. If you plan ahead of time, you can hopefully minimize any tax refund, thereby putting more money into your pay check. One major change you will experience is that you will not have the advantage of being able to depend on receiving a tax refund during the bankruptcy.
- Organize Documents. Your attorney will be asking for a lot of documents. Some attorneys place this list on their website, while others have the list in their office. A typical list will include deeds, mortgages, vehicle titles or registration, pay advices for 7 months, financial accounts for 7 months, 12 months evidence of any cash advances, and 4 years of tax returns. Should you not have your tax returns, you should be able to order a transcript by filing out Form 4506-T. You will also need payoff figures for all secured debts, together with how many payments you have left if less than 5 years.
- Don't Hide Anything. As long as your attorney knows of everything about your assets, transactions, debts, income, and expenses, he or she should be able to plan accordingly. I have run into horror stories that have ended up costing my clients a lot of money because of either hiding things or misstating the truth. If your attorney doesn't know the truth, he or she may not be able to help you when things start heading South.
- Arrange Filing Date With Your Finances. There is a 14 day window in which to file your Plan after the filing of the bankruptcy. The Plan is a document, after approved by the Court through a process called Confirmation, that outlines what moneys will be paid to the Trustee, and how the Trustee will distribute the funds. The initial payment is due 30 days after filing.
- Pay Without Receiving Bill. When you file bankruptcy, because of something called an Automatic Stay, you will probably stop receiving bills for things you are accustom to paying only after receiving a bill. For example, if you normally receive a statement on leased property, and then send in your payment, you should contact the leasing company and find out where to send the payment while in bankruptcy, and mail it in. Why does the company stop sending statements? They are afraid this could be construed as a collection effort, which has consequences while in bankruptcy with the automatic stay in place. Also, according to your plan, there are some payments that you may be making directly to a creditor. Make sure the payments are timely made.
- Miss Work!. OK, that's a little strong. But you will have to attend a meeting with your attorney and the trustee after filing. It typically takes about 5 minutes, and is assigned to a 30 minute time slot, along with some other bankruptcy filers. You will receive the date and time of this meeting shortly after filing, and is referred to as a 341 Meeting or Meeting of Creditors. I really don't like the name Meeting of Creditors because, while creditors can attend, it is unusual. A more descriptive name would be something like Meeting With Trustee. Along with the notice containing the date and time of the 341 Meeting will be a time and date for a Confirmation Hearing. Check with your attorney to see if you.
- Discipline. That's right, now for the hard stuff, unless you are disciplined to stick with the Plan, and a budget according to the papers filed with the Court. The more disciplined you are, the easier it will be. Few people find it easy to successfully complete a Chapter 13 Plan and receive a Discharge. Should things not go as planned, get with your attorney right away, as there may be things he or she can do through the Trustee or the Court to increase your chances of success considering your new circumstances.